Facebook Promises Congress It Will Address Libra Cryptocurrency Concerns

Facebook’s planned Libra cryptocurrency is not intended to compete with existing currencies or to interfere with monetary policy, and will not launch without regulatory backing, the company is expected to say in Congressional hearings that begin on Tuesday.

The testimony by David Marcus, who oversees Facebook’s Libra and broader blockchain efforts, follows comments by the US Treasury on Monday highlighting the potential for Libra to be used by criminals and extremists.

Jay Powell, chairman of the Federal Reserve, the US’ central bank, also said last week that Libra raises “serious concerns” and called on Facebook to halt the plan until the issues have been addressed.

“The Libra Association, which will manage the (Libra) Reserve, has no intention of competing with any sovereign currencies or entering the monetary policy arena,” Marcus is to say on Tuesday, according to testimony released by the Senate Banking Committee.

Regulatory fears

“Monetary policy is properly the province of central banks,” Marcus added.

“Facebook will not offer the Libra digital currency until we have fully addressed regulatory concerns and received appropriate approvals.”

In the prepared testimony Marcus said the Switzerland-based Libra Association planned to register as a money services business with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) and would comply with anti-money laundering and Bank Secrecy Act regulations.

He is scheduled to testify on Tuesday and Wednesday before congressional committees that oversee financial issues, several members of which have already argued Facebook should be prevented from launching Libra at all.

Marcus said the Libra Association would not hold users’ personal data apart form basic transaction information, and that user data provided to Facebook’s Calibra digital wallet would not be shared with the parent company or used for targeting ads.

But he also urged lawmakers to back innovation in digital currencies such as Libra, saying that otherwise those whose “values” are “different” may do so instead.

“If we fail to act, we could soon see a digital currency controlled by others whose values are dramatically different,” Marcus said.

Hostility

Late on Monday, US treasury secretary Steven Mnuchin told a press conference that Libra could be used by “money launderers and terrorist financiers” and that the currency was a national security issue.

Mnuchin said Facebook would have to convince regulators that Libra’s possible benefits outweighed these risk factors, but declined to give a timeline for when this might happen.

He said he was “not comfortable today” about digital currencies and that Facebook was a “long way away from” securing approval.

Cryptocurrencies “have been exploited to support billions of dollars of illicit activity like cyber crime, tax evasion, extortion, ransomware, illicit drugs and human human trafficking”, Mnuchin noted.

Facebook has said it wants to launch Libra next year, but has been criticised by banks for failing to win over regulators before announcing the project with great fanfare last month.

The company has faced scepticism and outright hostility to the project since launch due in part to its history of disregard for data protection rules.